One way to think of a Charitable Remainder Trust (or CRT) is like a reverse mortgage that you establish with a participating charity. You promise certain property to a charity, and in return they pay you a certain sum of money per year. The amount the charity will give you yearly will depend on the value of the property you promise to give the charity, and your age when the charitable remainder trust is established. Certain organizations offer charitable remainder trusts, and others do not. Further certain organizations offer the legal service of drafting the CRT for free. They usually do this to insure the Trust is drafted in the manner they prefer, and to keep the cost of having to review each charitable remainder trust to a minimum.
Even without a participating charity, a charitable remainder trust can be set up by an individual under the Internal Revenue Service Code. This would still be an irrevocable trust like in the previous example. The person that sets up the Trust called the Settlor or Trustor, establishes the irrevocable trust with him or herself as the beneficiary. They receive a percentage of income, and the remainder goes to a charity. This is usually considered an advanced estate planning method, but the classification is really pretty unimportant. The only reason for the distinction is that it is usually used by persons with larger estates looking to reduce estate tax liability. However, it can be used by anyone. Some client’s situation is such that they find this option interesting. Their situation normally is one where they either have huge charitable intent, or have no living relatives and huge charitable intent. Whatever your situation, we can always discuss various options.
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William Daniel Powell
This document is for informational purposes only. Nothing in this is to be considered legal advice. Nothing in this shall create an attorney/client relationship, nor shall it create a confidential relationship. If you need legal advice (in California), feel free to contact me or someone licensed to practice in your jurisdiction. I assume no liability or responsibility for actions taken, or not taken, as a result of reading this information.
Also, please remember that I speak in generalities in my blog and my website. There are so many different factors that can contribute and completely change the outcome that it would be impractical to discuss all of them here.